Money

Emma Skinner, Editor of  CompareAndSave.com reviews our choices:

What is a rewards credit card?

Reward credit cards do pretty much ‘what it says on the tin’ – they reward you every time you spend using the card.

Cash back credit cards are a form of reward credit card so you can expect similar things from other kinds of reward cards as you would from a cash back card, but the reward you earn may not necessarily be hard cash.

These cards build up reward points when the user spends using the card. The points can then be exchanged for some kind of gift – the type of reward you will get will depend on which credit card you have chosen but can include anything from high street shopping vouchers to air miles.

Of course, there are negatives to reward credit cards as well as positives. For example, if you have a high amount of outstanding debt on the card, the interest you pay will far outweigh how much the reward is worth.

These types of card tend only to be worthwhile if you pay off your balance in full each month so you could use them for expenses you are used to paying out during the month (such as fuel or food shopping), put the money you would have used aside in a savings account (which you will earn interest on) and then pay your card off with that money when your bill comes through. As you can see, these cards do require a certain level of financial discipline to be useful but the resulting rewards can be extremely worthwhile.

Missing out

It seems that although many of us use credit cards on a regular basis, few of us reap the benefits that reward credit cards can give us. In fact, according to a study by American Express, Britons have lost out on £3.6bn worth of these rewards. The research also established that users who do claim their rewards save an average of £116 per year.

Over-50s finance

Research carried out by Saga, the over-50s finance expert, found that people over the age of 50 own more credit cards than any other age group. Nearly half (49%) of all respondents said that they use more than one credit card to manage their finances, with 7% carrying more than five cards in their wallet. Only 23% of those over 50 do not own a credit card.

Responsible use

The Saga research also showed that although it seems people above the age of 50 finance their lives using credit cards, they use them far more wisely than younger people.

Almost three-quarters (73%) of credit card holders over the age of 50 have never missed a credit card payment in their lifetime – compared to 53% of borrowers under the age of 50.

Chief executive of Saga Group, Andrew Goodsell, said that over 50s are “much wiser when it comes to using credit cards, not exceeding their credit limit or missing payment deadlines”.

It’s not only Saga that found good habits in the over 50s – FINRA Investor Education Foundation also has research suggesting that 75% of people over the age of 60 pay their credit card bill in full each month.

How over-50s could gain from reward cards

From what we know of the finance habits of the over-50s, such as how they use their credit cards, it is safe to say that rewards credit cards would be a greater benefit to the older generations than any other age group.

Without large outstanding balances, and very small (if anything) interest payments, the over 50s could receive plenty of valuable rewards to suit their lifestyle as they will have the perfect credit history and stability that credit card providers crave.

What rewards?

There are hundreds of different types of reward credit cards available, including cash back and air mile credit cards.

The best way to choose the right card for you is to consider what items you spend a lot of money on each month. For example, if you enjoy grocery shopping and like to splash the cash on luxury food items, perhaps a Tesco or Sainsbury’s card would be ideal because you can earn extra Clubcard/Nectar card points to spend in store, as well as the chance to earn points on your shopping elsewhere.

Alternatively, you might like something to contribute towards your annual holiday, making a Virgin card a good option because it offers 10% discounts on Virgin holidays.

Alternatives

If you are not in a position to take advantage of reward credit cards, there are alternatives available. You might want to consider prepaid cards, which can also offer you some excellent bonuses. For example, some applications enter you into prize draws, whereas other prepaid cards may offer discounts on phone calls – there really is something for everyone.

Emma Skinner

About the author

Emma Skinner is the Editor of CompareAndSave.com, one of the UK’s leading personal finance comparison sites, specialising in saving people money by giving them the information they need to compare credit cards, prepaid cards, insurance and utilities.